Audio Of The Week: Crypto In China

A bunch of friends and colleagues were in China a few weeks ago for a big crypto conference and since then, I’ve had a number of fascinating conversations about the crypto sector in China.

Over the last few years, it has become apparent to me and others that China is innovating in the crypto sector in ways that the US and other western countries are not. This is happening for many reasons, including stronger user value propositions for crypto in China, a different regulatory environment, and a vibrant crypto trading sector.

This podcast explores many of these issues and is a good listen if you want to understand what is going on in the Chinese crypto sector better.


Comments (Archived):

  1. William Mougayar

    Yup. While much of the crypto innovation starts in the US, China/Asia is where you can apply it without regulatory restrictions, and sometimes even leapfrog. It is sad what has happened with US exchanges who used to lead, and now they are maybe 10% of worldwide activity.

    1. jason wright

      “without regulatory restrictions” – but isn’t Beijing pro AI and anti crypto, for ideological and political reasons of continued state and social ‘cohesion’?

      1. William Mougayar

        As the podcast implied, you have to read between the lines of their regulations. Ultimately, they favor themselves over anything foreign.

    2. Matt A. Myers

      Should the US also follow and learn from China’s tyrannical behaviour? That part of their behaviour doesn’t seem to be going so well for Hong Kong. If we want to be arguing with shallow, emotional rhetoric – and not concrete critical thinking, then might as bring into the discussion the bad behaviour of the tyrants in control in China.

      1. JLM

        .There is NO aspect of Chinese gov’t anybody who loves freedom wants to admire or emulate. They are despots, ruthless, brutal, murderous, not-to-be-trusted, evil, Communist despots.China just celebrated 70 years of Communist rule going back to Mao — the Long March, the War on the Landlords, the Great Leap Forward, the Great Proletarian Cultural Revolution, the Korean War.The Chinese Communists have murdered — many through the purposeful allocation of foodstuffs to generate foreign currency that resulted in millions of deaths by starvation — more than the combined populations of New York, Texas, and California.Now, they are using tech to create a digital despotism of gargantuan proportions through the Chinese Social Credit System.Read this: https://themusingsofthebigr…The USA better start paying attention to the Chinese wholesale militarization of the South China Sea (40% of the world’s shipping goes through here), Africa, S America, their fledgling but ascendant blue water navy, their sprinting nuclear tech (during the 70th anniversary parade they showcased two new nuclear weapons systems — one can reach the US with 10 MIRVs per rocket in 30 minutes and the other can approach targets at speeds of 8,000 MPH rendering our anti-missile defense impotent.One thing that has been uncovered in the US-China trade negotiations is that the Chinese do not intend to do anything voluntarily. They will only do what becomes sufficiently painful and only to relieve that pain. This is why having an SOB like Trump is so valuable — he will slap them in the face and call them out.The Chinese could fix the NK problem in ten minutes if they wanted to. They don’t want to.People need to read what Mao has said. The world ignored Hitler’s Mein Kampf to their enormous peril. China is a country that believes they can prevail after a nuclear exchange. They are a “strike first” country.The Chinese militarization of the S China Sea — wherein they fortified 12 islands and atolls — with its competing claims of sovereignty showed China for who they are. They just seized these island, atolls — dredged sand and built them into facilities with runways capable of handling their entire nuclear bomber fleet, hosting squadrons of jet fighters, enormous tracking radars, state of the art shore-to-ship missile systems, and hardened radar and C & C facilities.This is exactly what it seems to be — the movement of the sovereign water presence of China to a spot where they can dominate the Philippines, Japan, the South China Sea. It pushes the naval frontier of China far from its coastline.The Chinese are on the march. They are despots. They are killers. They are coming for the rest of the world. America better wake the fuck up.JLMwww.themusingsofthebigredca…

        1. Matt A. Myers


    3. Richard

      As to this missed opportunity, whats Cananda’s take ?

      1. William Mougayar

        Canada is following the US. They are intertwined.

    4. pointsnfigures

      Yup, we are at the point where the fear ingrained in the culture of the SEC is inhibiting ground breaking and standard of living raising innovation.

  2. Richard

    It is no secret that games of chance are popular in the Chinese culture. American culture on the other hand has always been a mean / variance framework – where we maximize gains and but address risk. Crypto discussions need to start including the risks of decentralized Cryptocurrencies to be taken seriously. I know that Peter Thiel thinks that the restaurant business is a fools game, but if we can get the the Chinese crypto crowd to fall for the Jewish Deli we could be onto something very big. Cryptos breakthrough app, Stuffed Cabbage and Borsh. Who knew.

    1. Matt A. Myers

      Indeed, China would love if everyone used an immutable blockchain database – so transactions of dissidents can be followed – moving everyone off of paper currency. A great way to tighten your hold! Plus at the moment, a great way to use their low-cost energy production to make money off of those buying into the crypto-“currency” hype.

      1. JLM

        .The Chinese want to determine how many children are born, where they are born, and how they are raised.They have a system called the Chinese Social Credit System whereby they rate everything about every person on a continuum of “obedient/trustful” to “disobedient.”They expect to have this system fully operational next year. It is partially operational right now. They will also have a similar system for companies — 33MM companies. To obtain a CSCS rating a company has to provide as much info as an S-1.All opportunity in China — schools, the ability to buy a car, what apartment you can rent — will be allocated by the state based on your personal score.Already, China has disallowed more than 32MM plane tickets and 6MM train tickets for people they have deemed as “disobedient.” This is happening right now.If you are “disobedient” you are, essentially, going to be put into a digital gulag.China intends to control every aspect of the life of their people and eliminate — kill, like they are killing the Muslim Uyghurs right now — anybody who is a problem.In Hong Kong when China took over their property, they promised “One China, Two Systems” — well, that has not aged well.China would love to have a digital currency, love to have all their people keep all their wealth in digital currency, and use it as one more way to control the disobedient.I wrote about this here: https://themusingsofthebigr…If you read that, you will be amazed at how ambitious, pervasive, and scary the entire system truly is. It is beyond belief.China is a digital despotism and crypto plays right into their hands.This is also one of the reasons the Chinese support the digital payment systems of companies like WeChatPay and Alipay — they are based on digital face recognition. They want to be able to control the cash flow of EVERYONE.JLMwww.themusingsofthebigredca…

      2. William Mougayar

        That wasn’t my point. The US has missed taking a leadership position in crypto. It was theirs to lose, and they are losing it. I’m not implying an endorsement of Chinese politics if I’m saying that in China & Asia they are doing interesting things with crypto and pushing the ball forward.

        1. Matt A. Myers

          I know it wasn’t your point.”While much of the crypto innovation starts in the US, China/Asia is where you can apply it without regulatory restrictions, and sometimes even leapfrog. It is sad what has happened with US exchanges who used to lead, and now they are maybe 10% of worldwide activity.”You’re not connecting your supposed sadness with your first point to end with a more balanced view as to why it’s occurring, where it’s occurring: so the question is, would you rather live in North America or China? Because you take the bad with the good of each system.

          1. JLM

            .Strong, excellent comment. Well played.JLMwww.themusingsofthebigredca…

  3. Richard

    The greatest harm to society is asset price inflation. When you purchase a bitcoin – you are doing nothing more than LENDING dollars and in return you are being issued a security, the bitcoin (yes Fred it is a security). Unlike securities backed by plants and equipment which increase economic output without inflation, bitcoin causes inflation and wealth concentration. Lending money for consumption is a not the solution to today’s wealth disparities.

    1. JLM

      .It is hard to argue with owning hard assets (real estate) with a fair amount of leverage and a uniform, consistent 2-4% annual inflation that drives the market prices in front of it.Some of the greatest fortunes have been built on such a scenario.Even better if interest rates are low.The four legged stool of hard assets, a bit of inflation, low interest rates, and a growing market — which is where most of the USA is today — is a wonderful thing.People in high risk businesses should diversify into this posture.This is the best economy in a century. Now, if we only hadn’t killed community banking.JLMwww.themusingsofthebigredca…

      1. Richard

        Yes, from what I can deduce Community banks are the lenders to small business and small business are the engines of job growth – particularly young black and Appalachian white.As to real estate – why is Sam Zell calling a top?

        1. JLM

          .Community banking — the redeployment of community capital entrusted to a bank by locals to locals who are using it in the community — is dead. Regulation killed it.When I got into business, a man could get a banker to lend on his character. That used to be where a lot of what might be considered VC came from. Not crazy stuff, but a vet returning home to start a construction company, a guy with a job who wanted to buy and fix up a couple of rent houses, a guy starting a landscape company.All stuff that was in the community.Now, it’s gone forever.Sam Zell is one of the brightest real estate guys in the history of the game. I sold my office building portfolio to a company out of DC (Carr America) which was funded by a guy from Santa Fe (Bill Sanders — BETO’s father-in-law) who unloaded it all to a Sam Zell company, Equity Office.I got to meet him several times.He is as rough as a cobb, but he knows the grass roots, sidewalk level real estate game as nobody else at that level does.The institutional money coming into real estate is getting a little sloppy. With alternative cash returns so low, real estate making 5% looks attractive. Real estate is a 10% business. If I can’t make a cash-on-cash all in 10% ROI, then you can cut my pinky off. Left one.I used to use 5% equity and 95% mezz/mortgage debt and made the numbers dance. It was a risk business that required constant management every month. And you had to be able to deliver the finished product on time and on budget. You had no room for error.Now, it’s essentially a coupon clipping business in which pension funds fall into bed with developers who have never stared down that kind of risk, who are really not builders, they lay off all the construction risk to bonded contractors, with all the property management being done by third parties, with the leasing being done by third parties, and with leases that are like bond rating agency actions.I used to have my own construction management entity, my own property management company, and my own leasing team. It was a turnkey operation and, therefore, I had control of it.Places like NYC have driven the rents so high they are killing certain asset classes — ground floor retail, as an example.There will be a flushout — something Zell is good at though I don’t know what his health is like. He’s probably 80.JLMwww.themusingsofthebigredca…

          1. pointsnfigures

            I think the Grave Dancer is in good health. Occasionally see him walking around Chicago. I think he still rides motorcycles.

          2. JLM

            .Had forgotten his nickname. Haha.JLMwww.themusingsofthebigredca…

    2. pointsnfigures

      Actually, deflation is worse than inflation.

      1. Matt A. Myers

        If your status quo is a stagnant system, so locked up with friction, and you don’t realize that there’s abundance, then sure.

        1. pointsnfigures

          Thinking more about the deflationary time in the Depression. If you didn’t spend money and waited, goods and services became cheaper. Opposed to rampant inflation where if you don’t buy that loaf of bread today, tomorrow it will cost you even more. It’s the one good argument for the QE policy the Fed pursued post crash. Friedman and Schwartz (… discovered the liquidity crunch due to the gold standard in the Depression made central banks unable to overcome the crisis.

  4. Douglas Crets

    too bad that china is a totalitarian fascist state. I wouldn’t put my investments there. On a regular basis over the past four months, my neighborhood has gotten tear gassed because 7 million other people in Hong Kong agree. Better off in Taiwan. Our VC firm actually invested in Dapper Labs with you, Fred.